THE TRUTH ABOUT THE TRUMP ECON­OMY

Daily Southtown (Sunday) - - OPINION - Steve Chap­man schap­man@chicagotri­bune.com Twit­ter @SteveChap­man13

Don­aldTrump and his le­gions are not tightly teth­ered to fac­tual re­al­ity, but they are will­ing to grab on to it when it suits them. One of those oc­ca­sions is when the of­fi­cial un­em­ploy­ment rate— which as a can­di­date he de­nounced as “the big­gest joke there is in this coun­try”— comes down, as it did in Oc­to­ber, reach­ing 3.7 per­cent.

For vot­ers on the fence, who may not like his many coarse and racist views, the state of the econ­omy may be enough to per­suade them to vote Repub­li­can on Tues­day. Even crit­ics have to ad­mit that what­ever else he has done wrong, Trump has man­aged not to turn the boom to bust. The com­bi­na­tion of solid growth, low in­fla­tion and un­em­ploy­ment, and ris­ing hourly­wages is hard to beat.

Re­pub­li­cans give all credit toTrump and theGOP-dom­i­nated Con­gress for cut­ting taxes, rolling back reg­u­la­tions, cre­at­ing jobs and restor­ing theAmer­i­can spirit of en­ter­prise. But the claim that the pres­i­dent has raised the econ­omy fromthe dol­drums and in­jected it with new vi­tal­ity is largely amyth. As an eco­nomic player, hewas born on third base and thinks he hit a triple.

Growth has been good, with gross do­mes­tic prod­uct ris­ing at a rate of 4.2 per­cent in the sec­ond quar­ter of this year and 3.5 per­cent in the third. But the eu­pho­ria be­ing felt by Repub­li­can­swas ab­sent when GDP­growth ex­ceeded 4.2 per­cent in four dif­fer­ent quar­ters un­der Barack Obama. The trick is to sus­tain such high rates, which Obama couldn’t and­whichTrump has yet to prove he can.

Though un­em­ploy­ment has fallen, job growth has not ac­tu­ally ac­cel­er­ated. In the first 21months of Trump’s ten­ure, the econ­omy added fewer jobs than it did in the pre­vi­ous 21months.

For a long time, he took credit for the ris­ing stock mar­ket. But the Dowfell by 5.1 per­cent last month, and the S&P 500 dropped 6.9 per­cent— mak­ing it, The­Wall Street Jour­nal noted, “the­worst Oc­to­ber for the S&P 500 since 2008.”

The stock mar­ket is still­well above the level on Elec­tionDay 2016, with the S&P 500 up by 27 per­cent. But that in­dex rose by 35 per­cent over the same pe­riod in Obama’s first term.

The tax cut­sTrump signed­may­well have boosted growth. But Re­pub­li­cans might not­want to look too closely be­hind the im­prove­ment. An anal­y­sis by The­Wall Street Jour­nal con­cluded that “faster gov­ern­ment spend­ing ac­counted for nearly half of the ac­cel­er­a­tion” that has oc­curred sinceApril 2017.

Cor­po­rate tax cutswere sup­posed to un­leash a flood of busi­ness in­vest­ment. But it gre­wat only a 0.8 per­cent pace last quar­ter, the slow­est in three years.

The im­me­di­ate ben­e­fits of the tax cuts also have to be­weighed against the longterm harms. The bud­get deficit bal­looned by 17 per­cent in the fis­cal year that ended in Septem­ber, and the Con­gres­sional Bud­get Of­fice es­ti­mates that the tax pack­agewill add $1.9 tril­lion in gov­ern­ment debt over the next decade.

The reg­u­la­tory roll­back­may also be good for some in­dus­tries, par­tic­u­larly those that pol­lute. But put­ting more tox­ins in our air andwater and more green­house gases into the at­mos­phere will­work to the even­tual detri­ment of hu­man health, the cli­mate and the over­all econ­omy.

IfTrump’s tax cuts and dereg­u­la­tion are wel­come in the busi­nessworld, his trade poli­cies have not been. He dis­carded the Trans-Pa­cific Part­ner­ship and placed new tar­iffs on steel, alu­minum, so­lar pan­els and a range of Chi­nese goods.

Econ­o­mist Steven J. Davis of theUniver­sity of Chicago and theHoover In­sti­tu­tion main­tains an in­dex of “trade pol­icy un­cer­tainty.” It has con­sis­tently been higher dur­ingTrump’s time in of­fice than at any time since 1994. Davis says the pres­i­dent’s trade pol­icy has had a “small nega- tive ef­fect onU.S. busi­ness in­vest­ment” and “has the po­ten­tial to cause a good deal more eco­nomic pain.”

Then there is the low­in­fla­tion brought about by the Fed­eral Re­serve, which lately Trump has blasted for rais­ing in­ter­est rates. Were the Fed to de­fer to his wishes, we could be in for a fu­ture of rapidly ris­ing prices.

The Amer­i­can econ­omy is show­ing a vi­tal­ity thatTrump is happy to at­tribute to his poli­cies. But what it needs nowis a pres­i­dent who grasps that the best thing to do is to stay out of the­way. And stay­ing out of the­way is not some­thingTrump likes to do.

Steve Chap­man, a mem­ber of the Tri­bune Ed­i­to­rial Board, blogs at www.chicagotri­bune.com/chap­man.

CAROLYN KASTER/AP

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